Gale's Content


Prune Your Client Base for Strategic Growth

Reprinted with permission from Accounting Today

Many firms are so awash in business right now that the idea of growing their firms is, quite honestly, kind of scary.  Meanwhile, they’re painfully aware that holding onto low-end work may prevent them from moving up-market to attract larger pieces of business.

Savvy pruning can help ensure that you have the time and resources to attract new clients that are larger, more technically challenging and in line with your strategic direction.

Review.  Commit.  Prune!

The first step in this process is to task your segment leaders (service line and industry niche leaders) to carefully review their processes and efficiencies with an eye to new and different ways to serve current clients.  Outsourcing (which has improved dramatically over the past couple of years) is one possible means.  Commit to internal process improvement, for example by considering approaches like Lean and Six Sigma (borrowed from the manufacturing world)  that eliminate defects and improve efficiency. One firm, Rea & Associates inOhio, has an entire niche dedicated to these approaches. Having successfully used the methodologies on their own firm, they now offer the services to other CPA firms.

Most important is thoughtful pruning of your client list.  Like a good gardener with unruly bushes, you can optimize future growth by trimming and shaping your client roster.  It’s a process that involves development of new business at the same time you prune from the bottom.  Many firms know this, but have a difficult time implementing. I suggest you charge your segment leaders with analyzing client profitability and drive the recommendations to determine what stays and what goes within each of their segments.

They Did It

Witt Mares is a large regional accounting and consulting firm headquartered inNewport News,Virginia.  Chief Administration Officer Mary Aldrich says the firm embarked on a pruning campaign in 2005 as one component of a larger initiative.

“It was part of leveraging ourselves for further growth in view of tighter resources, margins and profitability,” she says.  Witt Mares “needed to free itself to work at the next-highest client caliber level so we wouldn’t be spending time with clients that were no longer part of our target market,” she adds.

Niche and service line leaders worked with partners within strict guidelines.  Performance-based criteria were established for retaining or rejecting clients.  Considerations included factors affecting income:  realization rate, fee-per-hour, and fee and payment history.

Partners were given an opportunity to save a client from the “to-be-pruned” list by demonstrating that its performance was an anomaly and personally guaranteeing a certain result within a given period.  Scripts were prepared to assist partners in communicating the situation to targeted clients and a list of handoff firms was developed

The year following the initiative, realized rate-per-hour jumped firm-wide by a whopping 42%, according to Aldrich.  More importantly, net income per partner went up 62%! Witt Mares is a great example of a firm changing the way they viewed their client base and following through with the heavy lifting to get it in line with the firm’s strategy.

Prune Promptly

The time to prune is now, when times are good and your potential for attracting new business is high.  Wise firms are moving up-market and increasing the quality of their client base by bringing it to the top of the pipeline and pruning out what remains below.

Like the example above, the result is a high-margin client roster aligned with your firm’s strategic direction.  Remember, if your nose is too close to the grindstone rather than up to the wind, you’ll emerge from the boom times with a potpourri of mixed-margin, mixed-quality clients, rather than a well-trimmed and flourishing landscape.